Like Crypto Itself, GameFi Is Here To Stay

Many people are familiar with the concept of DeFi and it’s almost impossible to find someone that hasn’t heard of video games. It turns out that these two technologies are a great fit, marrying together to create an emerging industry called “GameFi”. It’s the name of a decentralized, blockchain-based world of video games that presents genuine opportunities to earn hard money in the form of cryptocurrency and NFTs. 

The COVID-19 pandemic that kept millions of people stuck at home, followed by the incredibly bullish crypto market in 2021 was the perfect storm that led to insane growth in the GameFi industry. With so many gamers having nothing but time on their hands, the prospect of earning money while playing games was too much to ignore, and GameFi flourished as a result. 

Yet the crypto markets are now crumbling as we enter what will likely be a long and painful winter, and the world has moved on from the pandemic, returning to the outdoors. Will GameFi survive now that conditions are less-than-optimal for its growth? 

GameFi Explained

To answer this question it’s important to understand exactly how GameFi works. This new generation of games is built on the blockchain – the immutable public ledger that powers Bitcoin and other cryptocurrencies. With these blockchain games, players can acquire NFTs that represent their “character”, be it a monster or a hero or a car or something else. They then take these characters and embark on various challenges and battles against other players, winning cryptocurrency when they are successful.  

There are other ways to earn money too. Some blockchain games provide a passive income stream, meaning that players make money regardless of whether or not they win. Others also incorporate staples of DeFi, with mining, staking and yield farming mechanisms available. Players can also trade the NFTs used to play games. So someone can acquire a basic NFT, then power up that character, before selling it on for a profit. 

While traditional video games have incorporated in-game money before, the difference with them and blockchain games is that these tokens can be taken out of the game and sold on a cryptocurrency exchange for fiat money. 

The popularity of some blockchain games has presented a big barrier to entry. In top titles like Axie Infinity for example, NFTs can sell for hundreds and even thousands of dollars. This has led to the rise of so-called gaming guilds, which are decentralized autonomous organizations composed of communities of players. These guilds use their collective money to acquire NFTs and loan them to “scholars”, who are promising new players. In return for being able to borrow an NFT, the scholar returns a portion of his or her earnings to the guild. 

Top GameFi Games

As mentioned, one of the most popular games by far is Axie Infinity, a card trading and battle game that has famously enabled some players to earn thousands of dollars a month. Axie Infinity has become the poster-child of the GameFi industry, being the first to generate over $1 billion in total token sales and hosting over a million daily active players at one time. 

Axie’s native token AXS has, since last year, also consistently ranked in the top 50 cryptocurrencies in terms of its market capitalization, according to CoinMarketCap. 

With regards to the gameplay, Axie Infinity players buy NFTs that represent monsters, and use these to do battle against other players. The winner of these battles earns SLP tokens, or sometimes AXS tokens, as a reward for coming out on top. There are other aspects to the game too. For instance, players can breed their NFTs with others to create brand new monsters, which must then be trained up before they can go into battle. 

Axie Infinity’s turn-based fighting game concept is one of the most popular of all in the GameFi space, and many other games have tried to improve on it. For instance, Arker: The Legend of Ohm, takes the same battle model but throws in additional elements such as pets, equipment and skills to create more complex player-vs-player action. Players have to acquire an NFT character and these can be upgraded with various skills, equipment and relics to enhance their competitiveness. 

The more complex element of Arker is pets. Each character can bring their pet along with them as they do battle. Pets are player’s companions, and they provide unique abilities that make the battles much more tactical. Pets are NFTs too, which means they can be traded on the marketplace. It’s also possible to breed pets.

Another reason why Arker is gaining popularity is the multiple earnings opportunities it provides. To participate in player-vs-player battles, players must first buy a ticket for a fixed price before they can compete against their opponent. If they win, they earn FoA tokens and experience, but if they lose, they could soon be out of funds! 

Lucky, there are other ways to earn money such as with player-vs-environment mode, which involves battling AI-powered monsters for rewards. Other ways to earn rewards include daily challenges, special events and guild wars, where teams of up to 10 players face off against a rival team. 

Other popular play-to-earn games are focused on themes such as fantasy worlds and building. Infinity Skies is a rapidly growing game that incorporates mechanics from classic titles like The Sims and Diablo. Each player owns an island, and upon that island they have to create a gigantic fantasy castle that’s more impressive than their peers. 

These fantasy castles are actually more akin to mini-metaverses than anything else. In Infinity Skies, there’s a social concept that involves visiting other players’ castles to socialize, make friends, complete challenges and more. Players can vote for their favorite castles, giving “prestige points” to the recipient. At the end of each month, the players with the most prestige points win exclusive and exceptionally rare NFTs. 

These NFTs are vital, of course, because they serve as the building blocks of people’s castles and also represent things like furniture. So the more creative you are at designing your castle, the more famous you become and the more rewards you earn to improve on it even further. 

What’s Next For GameFi? 

Last year everything looked rosey for the future of GameFi. In the third quarter of 2021, blockchain-based games generated a staggering $2.3 billion in revenue, an incredible amount of money for a new industry that gave lots of cause for optimism. 

However, GameFi is now experiencing some growing pains as the crypto market enters into a decline. Games are generating far less revenue than before as token prices collapse, and NFT prices have been falling rapidly, meaning players are struggling to make as much money as before. Add to that, the popularity of some of the biggest games, like Axie Infinity, has been on the wane, leading some to suggest that GameFi is little more than a passing fad. 

One of the reasons for this decline is that GameFi games aren’t always the most enthralling. Axie Infinity for example has attracted plenty of damning reviews from players who say they quickly become bored with the game. So once the novelty of earning money wears off – or if a player is already flush with cash, there isn’t a lot of reason to keep playing the game after a while. 

Luckily, the industry has moved quickly to address this lack of playability with a new generation of more compelling play-to-earn games. New titles such as MOBLAND, a mafia-style game that involves building a criminal empire, and Pegaxy, a horse racing simulator with links to the real world racing industry, provide a much more immersive experience that can hold player’s interest for weeks and even months. 

Play-to-earn games are adding more functionality all the time too. Jelurida, the software development firm behind the Ardor Blockchain, has made it easier for developers to add NFT and crypto functionality to their games through its blockchain-as-a-service. It allows developers to create customizable “child chains” linked to Ardor for every title they create. One of the best known games being built on Ardor is Mythical Beings, an NFT card trading game where each token has its own unique abilities and story. 

Jelurida has also bridged Ardor to multiple other blockchains, including popular ones such as Polygon, the Layer-2 scaling solution for Ethereum. Through this, NFTs from Mythical Beings and other Ardor-based games can now be traded on Ethereum NFT markets, enabling them to reach a much wider audience. 

Another reason for optimism around GameFi is that the industry continues to rake in millions from investors. Earlier this month, the NFT gaming-focused platform Immutable announced it has launched a $500 million fund to support and scale Web3 games and NFT platforms building on its own Layer-2 scaling solution for Ethereum, called Immutable X. 

While some critics have said the GameFi industry is a bubble, the fact is that this is just the latest in a long line of heavy fund raises the industry has attracted. That’s evidence of not so much a bubble, but rather the fact that crypto gaming is just an emerging industry. Once new concepts catch on and prove their worth, they traditionally raise an impressive amount of cash as investors race to help them reach their potential. 

Lest we forget, the blockchain gaming industry has an enormous captive audience that it can potentially tap into. Data from Newzoo shows that there are more than 2.7 billion video gamers worldwide, and the majority of these gamers are already familiar with the basic notion of in-game currency and digital items. So it’s not like there’s such a massive learning curve. It’s also clear that blockchain empowers these gamers with clear benefits with the opportunity to not only earn financial prizes, but also recoup their investment in a game by selling their NFTs when they stop playing.  

GameFi In Every Game

It’s because of this unique value that Reddit co-founder Alexis Ohanian believes that almost every video game will incorporate a play-to-earn element within the next five years. He told Business Insider in January that 90% of people will refuse to play games that don’t provide any value for the time they spend playing them. 

“In five years, you will actually value your time properly,” Ohanian said. “And instead of being harvested for advertisements, or being fleeced for dollars to buy stupid hammers you don’t actually own, you will be playing some on-chain equivalent game that will be just as fun, but you’ll actually earn value and you will be the harvester.”

Mainstream games and hardware developers appear to be taking note of this. The Blockchain Game Alliance founded last year is an organization that seeks to raise awareness of GameFi, and it has an impressive list of members including Ubisoft and the chip maker Advanced Micro Devices. 

For all its faults, the Axie Infinity game nevertheless managed to attract widespread appeal, despite its gameplay being labeled boring and dull. With investor money pouring into the industry and developers doubling down on their efforts to create more exciting and playable games that will have even more appeal, it’s hard to argue that GameFi’s future isn’t looking bright. 

It’s not easy to predict how the future of GameFi will unfold. The pace of innovation in blockchain is so rapid that new capabilities arise almost every single day. Many of these can be expected to make their way into GameFi, bringing with them yet more exciting ways to monetize the video game experience.